Session 3: Local content and linkages

Introduction

In the previous two sessions you looked at the ‘resource curse’ and how politics affects the direction and depth of such a curse. One of the key issues for a capital intensive and internationalised sector like oil is how to create benefits for the domestic economy. For many countries the prime route is through ‘rents’, which is state income derived from granting companies access to your oil. The issue here is that these rents may not go directly to developmental investment. Other avenues for deriving benefits from oil investment are through generating linkages to other firms and thereby stimulating growth and employment. This is called ‘localisation’ and some African governments have legislated to facilitate this through ‘local content’ laws. In this session you’ll explore the idea of linkages and see how far Ghana has managed to achieve beneficial localisation of its relatively new oil industry.

The learning aims of this session are to:

• appreciate the theories around linkages from resource extraction
• understand how localisation fits with African development agendas and the balance between state and private initiatives
• outline the debates around why China is assumed to be ‘bad’ at linkage development
• understand how linkages play out in concrete contexts, using Ghana as a case study.

The key question to reflect on during learning in this session is:

• To what extent can African countries leverage wider developmental benefits from oil investment and trade?